Ikea, the world’s largest furniture retailer, will open its first store in India in early 2017 in Hyderabad, said Juvencio Maeztu, chief executive of Ikea India.
The company is currently in discussions with the governments of Maharashtra, Karnataka, Delhi, Uttar Pradesh, Haryana and Telangana to buy land to open stores in those states, he said.
Land acquisition has been the most challenging step in the process so far, Maetzu said. “The price is too high. It just doesn’t make sense to pay that,” he said.
Maetzu was speaking at the Economist India Summit 2015 in Delhi in response to a question on the challenges of doing business in India. “The process to acquire the land (is too complicated) and the land titles (are not clear),” he said. “It’s not enough to say it’ll be okay.”
Responding to a question on what he would like the Narendra Modi government to act on, he said it was critical for the government to implement the goods and services tax (GST).
“Let’s agree GST is important and let’s move on,” Maetzu said. “GST will reduce price for consumers. This has to be said clearly. It’s not a political issue. We cannot waste time any more on this.”
That urgency, however, may not necessarily translate into action. At an earlier session finance minister Arun Jaitley hinted at the possibility that the government may miss its self-imposed deadline of 1 April 2016.
The Swedish company announced earlier this year in July that it bought its first piece of land in Hyderabad. The 13-acre land was strategically located, close to the information technology hub called HITEC City, and next to an upcoming metro railway line. It has said in the past that it plans to invest Rs.12,500 crore in India and open 25 stores across the country.
Ikea retail will still be the old-fashioned brick-and-mortar store and not e-commerce. “Our concept is based on the store,” Maetzu said. “We need to establish the brand with the store and build multi-channel on top.”
With that aim, the company plans to open several stores simultaneously, starting with the one in Hyderabad. Each store takes an investment of about Rs.500 crore and takes roughly 18 months to build.
“We are not an e-commerce company. We are a single brand retailer based on brick and mortar.”
In September 2012, India allowed 100% foreign ownership in single-brand retail, opening the doors for fashion retailer Hennes and Mauritz AB (H&M)—which is opening its first store in India next month—and furniture vendor Ikea. Under that policy, it also requires companies to source at least 30% of their products from Indian companies.
Ikea has said it plans to increase the amount of goods it sources from India and wants to create more categories with local products, a process that requires time. Ikea has typically sourced textiles from India. It’s now adding other categories including furniture, mattresses and goods made from unique local products like acacia, banana fibre, bamboo and jute.
“In some cases you have to grow the bamboo and that takes time,” Maetzu said.
This article was first published on Livemint.com